Weekly Financial News Roundup
Despite earlier moves by Marks & Spencer to quash speculation that its Executive Chairman, Sir Stuart Rose, would be stepping down before July 2011, Sir Stuart himself said for the first time in public on Monday that he hopes to step down before that date. He was quoted on the London South East website saying, "It's quite clear. I said I would extend my tenure at the least until 2011. What we said, effectively, was that was to allow us to work out the succession." Clear, indeed, Sir Stuart. Remarks accompanying Marks & Spencer's annual results had hinted at the possibility of an earlier exit for Sir Stuart, although Marks & Spencer was keen to point out that his successor is likely to be drawn from its own ranks, rather than elsewhere.
In other news, businesses whose business model is strong enough to survive the recession may emerge in a better position than they were before, according to Thomas Kalaris, Chief Executive of Barclays Wealth. Mr. Kalaris was quoted on the Birmingham Post website saying, "Despite word to the contrary, the world is most definitely flat. The global economy effectively has no borders, which should help us emerge from the recession faster, and growth in emerging markets should benefit all businesses which are preparing now for the upturn to come."
Sir Richard Branson has never been averse to bucking trends and was in the news again on Tuesday when Virgin Atlantic – still majority owned by Branson's Virgin Group – reported a sharp rise in profits. The near doubling of pre-tax profits, up to £68.4 million from £34.8 million last year, was in stark contrast to the results of British Airways, for example, which reported a pre-tax loss of £401 million last week. British Airways blamed a fall in premium fare travellers in the second half of the year and increased fuel costs for the loss, but Virgin Atlantic reported that its results had been boosted by an increase in premium economy sales, and a number of discounted offers.
Elsewhere, with unemployment rising, having risen above 2 million for the first time in 12 years, figures released by the Chartered Institute of Personnel and Development (CIPD) revealed that just 20% of companies surveyed would be looking to employ graduates or school-leavers in the coming months. 33% of companies said that they had cut their graduate recruitment for 2009, whilst 45% said that they would not be recruiting from either group at all during the year. Gerwyn Davies, Public Policy Advisor at the CIPD, was quoted on the BBC website saying, "Against this backdrop, graduates and school leavers need to sharpen their case for being picked ahead of their classmates – and fast."
Wednesday began with the slightly sad news that household names Abbey, Alliance & Leicester and Bradford & Bingley are to disappear from the British High Street by the end of 2010 as part of a rebranding exercise by Santander. Santander intends to change the names of 1,300 branches to reflect its single brand policy which is already in operation in more than 40 countries.
In other building society related news, the Nationwide, the largest building society in the U.K., reported a 69% fall in annual pre-tax profits, to £212 million. The Nationwide complained that its profits had been hit by an "unfair" and "illogical" contribution of £241 million to the Financial Services Compensation Scheme (FSCS) – which guarantees deposits up to £50,000 – also blaming bad debt and reduced returns from mortgage customers for the loss.
Elsewhere, figures released by the British Bankers' Association (BBA) revealed that economic uncertainty is still dictating levels of borrowing in the UK. The number of mortgage loans approved did increase slightly to 27,685 in April, but the number was still down just over 15% year-on-year, and net mortgage lending in April reached its lowest level for eight years at £2.7 billion.
Concerns over the future of the Vauxhall plants in the U.K., in Luton and Ellesmere Port, and 5,500 jobs, grew on Thursday after the breakdown of talks in Germany over a buyer for its parent company, GM Europe. Two of the bidders involved in the negotiations have said that they will cut thousands of jobs in Europe, and with the German Government also involved, it is feared – despite Business Secretary Lord Mandelson having apparently received "categorical assurances" regarding continued production at Vauxhall – that Vauxhall's UK plants may bear the brunt of job losses.
There was some brighter news for the UK housing market and the beleaguered UK motor industry later in the week, although it was obviously too early to tell whether it marked the start of an, albeit slow, economic revival.
Average rent in the U.K. remained unchanged at £819 in May, after nine successive months of falls across the country, according to the property website Findaproperty.com, although the figure was still down 5.5% year-on-year. House prices too rose 1.2% in May when compared to April, taking the cost of the average U.K. home to just over £154,000, according to figures published by the Nationwide. This meant that the annual rate of decline in housing prices eased to 11.3% in May, compared with 15% in the previous month.
The scrappage scheme, announced by Chancellor, Alistair Darling, in the Budget, has been responsible for the sale of 35,000 new cars if Government figures are to be believed. Ministers believe that the cars would not have been sold but for the financial incentive – a £1,000 discount provided by the Government and a further £1,000 provided by the industry itself for scrapping cars at least 10 years old – but the industry said that it was too early to declare the scheme a success. The Government has set aside £300 million, or enough to fund discounts on 300,000 vehicles, in an effort to resuscitate the industry, which saw new car sales fall by 28.5% year-on-year during the first four months of 2009.